RECAP: Raising Philanthropic Capital in Uncertain Times - 360 Degree View

On Monday, June 29, 2020 CSIS and CCS Fundraising closed out a three-part virtual series on “Raising Philanthropic Capital in Uncertain Times.” This series considered data and recommendations behind how nonprofits and social impact organizations might continue to seek financial support, despite the economic pressures of the COVID-19 pandemic. The views expressed are solely the views of each panelist and not of the Center for Social Impact Strategy.

Jordana Cohen (Executive Director, CCS Fundraising) introduced the Giving USA results from 2019. Notably, public society, arts, culture & humanities, education, and environmental & animal welfare all saw double-digit increases in 2019. Individual giving in 2019 continued to rise, reaching over $300 billion, while corporate giving likewise continued to increase, demonstrating the largest increase since 2014. Furthermore, total giving in the last five years has increased by $75 billion, with demonstrable ties to the relative health of the US market.

While the data from 2019 shed an optimistic glow on 2020, there is — of course — no way to predict what this year’s philanthropic trends will reveal. Many individuals, foundations, and corporations are struggling under the financial strain of the pandemic, as the US simultaneously looks toward a tense presidential election this fall. This said, the remarkable global response to recent uprisings around racial inequality and police brutality demonstrates the willingness of individuals, communities, and even aspects of the corporate sector to support grassroots organizations, collectives, and nonprofits already invested in the fight for racial justice.

Elizabel Abel (Vice President, CCS Fundraising) moderated a conversation with Katherina Rosqueta (Faculty Director, Center for High Impact Philanthropy at the University of Pennsylvania), Eileen Heisman (President and CEO, National Philanthropic Trust), Greg Hagin (Managing Director, CCS Fundraising), and Peter Frumkin (Faculty Director, Center for Social Impact Strategy at the University of Pennsylvania).

Highlights from the conversation follow. Responses have been edited for length and clarity.

Elizabeth Abel: What surprised you most from the 2019 Giving USA report?

Greg Hagin: In some ways 2019 feels like an eternity away, but it’s still important to study what’s transferable, predictive, and what will carry through. Many results seem intuitive: Giving re: GDP, resiliency of individual giving, and bequests make sense. The top five sectors have been stable, although faith-based giving has been declining over the last 40-50 years, so that [decrease is] to be expected. In terms of surprises, we didn’t see tax reform play out in a particular way that would be negative, but it’s unclear what moves beneath data at a micro-level. Some would argue it inspired a more giving economy with more cash in pockets, but that’s still a question of curiosity. I was alarmed to see a decline in the market in participation. In the market 15 years ago, 68% of individuals in [the USA] were making a philanthropic contribution. Now it’s almost 54%, about half the country. It was nice to see corporate giving spike as the largest in the last 4-5 years.

Elizabeth Abel: As things hopefully begin to stabilize in the coming months, what do you foresee as the greatest challenge and the greatest opportunity for philanthropy?

Eileen Heisman: I was [recently] looking at the data the Center for Effective Philanthropy produced a couple of weeks ago, and I saw something in there which is really counter to what I teach: The charities that are more stable right now are those that are primarily foundation funded, and not being funded by individuals. There is often a reliance on long term loyal individuals relative to foundations, who we saw as being more fickle. Those foundation funded charities are feeling more stability at this moment, which to me is an upside down moment.

These times are not just a little unprecedented: They’re massively unprecedented, and of the assumptions we have from previous years — of downturns in ‘08-’09, primarily [in] the banking and mortgage industries — this is completely different. There is a global pandemic, unemployment is skyrocketing. I don’t think we can look at the past and [find] indicators for the future. I’m reluctant to make predictions.

We know that 20 million fewer households are giving now than in the year 2000 but giving is going up, which means it’s the domain of larger donors. When you look at the data, larger donors are [also] holding back. The confluence of these things does not create a great picture. This doesn’t mean you shouldn’t ascribe to CCS’ principles — keep communicating, keep asking [for donations], making the case — but you might be working just as hard as a fundraiser and not experience the outcomes you’re expecting.

The other thing is that donors are so reluctant to give unrestricted money or [give towards] overhead. There’s no more important time to realize that those are key, that the reserves most charities have are less than two months, and this [situation] could last for much longer. It couldn’t be more important than it is now to learn how to make a case for overhead, to learn how to explain it in another language [that is relatable to funders].

Elizabeth Abel: That speaks to an important need for data transparency and coordination. Kat [Rosqueta], I have a two part question for you: First, as vice chair of Candid, what have you seen as the philanthropic response around COVID-19 and more recently, equity and racial justice? Second, how have you observed public, private, and nonprofit sectors working together to create a coordinated response to the environment in which we’re living today?

Kat Rosqueta: At both Candid and at CHIP it’s exactly as Greg and Eileen said: The scale of COVID-19’s effects mean that this is certainly not like anything I’ve seen in my lifetime or professional career. It’s a global pandemic; Unlike other crises or disasters, man-made (like the refugee crisis in the Middle East) or natural disaster (like the earthquakes in Haiti or Japan), the helpers and those who need help are all affected. What that means about data, transparency, and coordination — it’s never been more important. It is the only way that we will be able to respond and survive.

I’ll offer this as a little bit of a bright spot: We’re seeing sharing of data that we haven’t seen before. An example is that CHIP is in [collaboration] with over a dozen philanthropic response funds in our region (so Southeastern Pennsylvania, Southern New Jersey), in partnership with a major family foundation (the William Penn Foundation) and with colleagues at SP2, like Actionable Intelligence for Social Policy and Ken Steif over at [Penn] Design), [and previously] we had not worked together in any meaningful way. All those funds had never shared data on their grant awards, outside of their boards or their program staff. But there comes a moment like we’re in now where people realize, ‘If we don’t do things differently we’re not going to make it.’

That’s the bright spot: All of these folks are doing some of the things that Eileen [Heisman] suggested people are going to need to consider: They are giving general operating and emergency support. They are releasing restrictions. [For example,] the grant that they had flagged for next quarter, they’re bringing it up because they know that people need it so desperately now. One of the things that we’re looking at [now is that organizations are collecting more data] than people are used to tracking, [such as] ‘what are the demographics of the folks you’re service? What are the demographics of the leaders of your grantees,’ [which] speaks to some of the things that Jordana [Cohen] showed earlier, ie: there is a link between the current COVID-19 health crisis and the racial justice concerns that people are working on now.

[Sharing data] is one of those best practices we’ve all known about: coordination and transparency [are] good things! I think the crisis has forced a lot of grant makers to realize [that] at this moment, it’s necessary.

Elizabeth Abel: In your opinion, do you think that we will see a shift in public expectations of government vs. philanthropy as a result of the recent crisis? Do you think philanthropy’s reputation may change as we look to the future?

Peter Frumkin: Over time, philanthropy’s position in relationship to public policy and government has changed. There have been periods when people have been enthusiastic about the potential of philanthropy to float and support the nonprofit sector and be the driver of social impact change, and there have been periods when there have been crises, problems in philanthropy and people have doubted it.

I think we’re in a period now where people are wondering about the capacity of philanthropy to take on some of the big problems, because the problems seem so huge; They don’t seem like the types of problems that philanthropy is particularly well-suited to address. [This is] particularly true of racial injustice, and great issues of inequality and social unrest — these are not issues that philanthropy is particularly set up to handle. These are bigger issues that state and local government, national government, international agreements could possibly tackle.

I’m concerned that the scale of the problems at present — both COVID and social justice issues — are bigger than the technical community problems that philanthropy is equipped to handle. If I were to guess, I would say that the pendulum is going to swing back towards the idea that we need a more robust public sector response to these big, big problems. Philanthropy will try to contribute — the biggest donors have plans in place to try to help — but the scale of the problems seems different and I think that’s going to tip us back towards a perspectives that says, ‘Yes, philanthropy can complement, supplement, and help, but the scale of the issue is so immense that we are going to need a much more coordinated, larger response from the public sector, and a lot of collaboration between government agencies.’ That doesn’t mean there’s no place for philanthropy; It just means that this is not typically the zone where philanthropy has had the most success.

Greg Hagin: I agree, and I wonder — in terms of the enormity of the challenges and the global issues, and just the immensity of problems that they propose, what is the role of philanthropy in these moments? Is it one of focused collaboration? Philanthropy as the ultimate risk capital — Can it go where other sectors cannot go, because there’s not a required financial return, but there’s a risk component? Can it serve as a catalyst for change, to prove out something (and then there’s some momentum and [a demonstration] that it’s safer to get more involved from a private and public sector solution)? Is that a role, a special place that philanthropy can fulfill that maybe no other form of capital in other sectors can?

Kat Rosqueta: My answer is yes. It is both what is great and what is infuriating about philanthropy. Philanthropy does not have a mechanism to hold itself accountable in the same way that government — at least in a democracy — does. We get to elect our representatives and hold them accountable through that [system]. In business, leaders are accountable to their shareholders.

Philanthropy doesn’t have that same accountability. It can do things that everybody scratches their head and says, “Really? We gave you that tax benefit to do your quirky project?” But it can also do things that are really on the edge, like R&D for society. So when you think about some of the things that are actually live policy discussions around defunding police, around paying attention to health inequities that are in our face in a city like Philadelphia (when you think about COVID), the folks who were first paying attention to them and working on them as pilot solutions or pilot policies, they were often nonprofits funded by donors who didn’t care if it was a politically unpopular thing to support at the time. To your suggestion of, ‘Is there a role that philanthropy can play around serving as a kind of R&D,’ philanthropy alone can’t solve it — its resources are just a drop in the ocean — but there is a role it can play on the margins that can be extremely helpful, precisely because it doesn’t have the same mechanisms of accountability as business and government.

Eileen Heisman: In addition — philanthropy leaders have a mouthpiece to the public in the public relations sense of it. [Philanthropy leaders] can say things publicly that government officials can’t say and private individuals might be too nervous to say. When Darren Walker is talking, when Melinda Gates is talking, when the head of MacArthur Foundation [is talking], you can hear points of view that get out in the public that are important for people to hear.

The other thing that’s really important… is the deployment of private investment capital for social benefit. We just had our very first donor who gave us a large amount of money, most of which got granted out, but the residual is going to be left behind. [The donor] wants it entirely in impact investments. Even though it’s still pretty small, there’s a statement people can make about how they want their money invested.

This conversation has to include the crazy political climate we’re in, in which social change and progress is hard to imagine with some of the issues we’re dealing with — domestically and globally — with an impact on the American political system. If we don’t make a change in the political climate, we’re not going to change any of these things.

The most important thing we can tell everybody in our lives to do is to vote — at the local, state, and federal levels. Government is where the really big changes happen, and we don’t have an environment where government is interested in supporting a lot of these issues. All of these things get woven together, and philanthropy is just one piece. We can be the heroes in the risk capital, but we can’t move the needle completely. The kind of collaboration that Kat [said] is happening at Penn is going on in other arenas. But the big piece is to get the federal folks there with us, or people that know and understand these problems. Tell everybody to vote. The leadership of this country makes the biggest difference in this than any one philanthropist.

Elizabeth Abel: Greg, in your experience, how has the nonprofit sector adapted to the new normal, and how is technology being used to mobilize donors?

Greg Hagin: [There have been] different stages or time horizons in this whole pandemic. There was this kind of ‘respond’ mode, and now ‘recalibrate,’ and [I think we’re moving] towards ‘reimagine.’ Something like half of nonprofits have less than six months cash on hand, and maybe 40% have less than a quarter of cash on hand. That was spring 2020: cash on hand, cash management, and survival. How do we look towards thriving again? That’s one framework I keep in mind.

[…] I also [agree] with the traditional aphorism that people are generous, giving, and resilient. At least from a fundraising perspective, most nonprofits have started to … outright ask: asking for gifts, asking for pledges, asking for a specific purpose, and relaxing constraints around how the capital might be spent. More important than ever, nonprofits need to demonstrate momentum, relevance, and purpose because it’s not beyond the realm of possibility that there will be some contraction in the sector.

On the word of technology, I think some of these tech players, giants, and entrepreneurs, they’re going to need to make some big gifts as well. If you look at their stock and net worth, some of these large founders — Amazon, Microsoft, Tesla, etc — their net worths have increased 40%, 50, some of them 100% in the last 100 days.

In terms of how technology may be used, the way we’re having this conversation right now — through Zoom and others —that’s how many of the requests are going to be made for the foreseeable future. Also, [in terms of] creating the donor experience, maybe virtual reality or augmented reality. Some people are saying that this pandemic moment has accelerated the future: We’re living in ‘the future,’ whether it is 2025 or 2030 right now. Some of those trends that were already underway have been accelerated.

Finally, hopefully technology can help create a more extensive and diversified set of philanthropic participants because it meets people where they are, and creates new channels and sources of inspiration. If we could create donor segments of one — the technology has the power to create custom philanthropic experiences — I think we’re going to see more contributions over time.

Elizabeth Abel: What are some of the most effective partnerships you’ve seen between philanthropies, public companies, and the government? What are some best practices you can share with the group?

Peter Frumkin: There’s one very pertinent example. It has some success and some disappointments: The Rebuild LA tri-sector partnership, following the riots after the [police brutality against] Rodney King [in 1991]. That in some ways is the most close example [in the United States]. [You could examine] rebuilding neighborhood businesses, refunding nonprofit infrastructure.

Kat Rosqueta: I’ll add one that I’m not as familiar with but I know is part of how different regions are opening up due to COVID. You have tech consulting groups like Deloitte who are testing contact tracing technology that municipalities and regions are using to help understand the public health status, and to enable reopening. There is technology coming from a private sector player alongside a government and — oftentimes — university that is training users in that kind of technology.

Eileen Heisman: A lot of the vaccine efforts have been really collaborative between private philanthropy, government, and the pharma industry. There’s [another example] that’s really old and I have talked about a lot: Julius Rosenwald. He and Booker T. Washington and the government, corporations, and universities built 5,000 schools to educate African Americans in the South. [The schools] were burnt down, they rebuilt them, and it was attributed with creating this model of public private sector, the community, that’s getting assistance having fundraising efforts themselves. So this idea of collaboration didn’t start in the last 20 years. It’s at least a century old. These things are really powerful when multiple stakes go in the ground together.

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To learn more or to view the conversation yourself, take a look at the call recording, which includes a partial transcript.